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My Say: This may not be a banner year for Asean

THIS should be a great year for Asean, as its most ambitious initiative ever, the creation of the Asean Community, takes effect in December. Comprising an Asean Political-Security Community, an Asean Economic Community (AEC) and an Asean Socio-Cultural Community, the ­Asean Community aims to raise the grouping from a mere talking shop to a more substantively integrated region, with a clout that puts it on par with the other big players in the world.

For businesses and investors, the AEC could make a huge difference, but only if it delivers on the freer flows of goods, services, people and capital within the region that would then give Asean the market scale to compete against the other giants of the world economy.

Unfortunately, if we take a step back and look at the underlying forces that will make or break this initiative, the portents are not good: Rather than being the start of a great new era for Asean, 2015 could actually crystallise damaging divergences within the region.

First, Indonesia, the anchor of the Asean system, is showing signs of de-emphasising Asean in its foreign policy. Second, a major divide is emerging within the grouping, even as there is much huffing and puffing about the Asean Community, and that is the divergence between continental Asean (Cambodia, Laos, Myanmar, Thailand and Vietnam) and maritime Asean (Brunei, Indonesia, Malaysia, the Philippines and Singapore).

Is Indonesia still committed wholeheartedly to Asean?

There is no question that Indonesia sees ­Asean as an important part of its foreign policy. But many are beginning to question whether it continues to value Asean highly enough to expend its resources in providing leadership and occasionally making the compromises needed to keep Asean healthy and its major initiatives such as the AEC on track.

However, the new administration in Indon­esia has followed a more muscular policy towards its neighbours since it took over. ­President Joko Widodo (Jokowi)’s blunt message to his Asean counterparts at the November 2014 summit meeting could not have been clearer. He told them that, as the AEC is implemented, he would not allow Indonesia to become merely a market for goods produced by neighbouring countries and “a victim of unfair trade”.

It is also interesting to see how ­Indonesia has become much tougher towards its neighbours since Jokowi took over, with its maritime authorities implementing a policy of blowing up foreign fishing vessels caught ­illegally ope­rating in Indonesian waters. ­Almost all the vessels so treated have been from neighbouring Asean countries.

Thus, Indonesia’s foreign policy is set to change. Recently, Rizal Sukma, a highly res­pected foreign policy adviser to the president, noted that Asean was no longer the cornerstone of Indonesia’s foreign policy, but just one of many such cornerstones. Jokowi’s foreign minister, Retno Marsudi, has observed that foreign policy under the new administration would focus more on advancing bilateral ties with strategic nations rather than the multilateralism that supports Asean. One implication was that bilateral ties with strategically important large countries such as India or even the Middle East would now be emphasised.

However, the changes in Indonesia’s stance reflect not just Jokowi’s views but a process of rethinking that has been underway in Indonesian policy circles for some time. A study by the country’s main intelligence agency on its place in the world published in March 2014, well before Jokowi was even elected, made similar points as those above, appearing to downplay Asean’s role and argue for greater emphasis on national interests. Its concluding chapter on international relations argued that its officials should bear in mind the need to ensure the dominance of Indonesian-made products when negotiating cooperation agreements with other countries. It is quite telling that the main reference to Asean in this chapter was to critique Indonesia’s “free and active” policy, which Asean countries liked, as confusing and ineffective.

Such a policy stance, if sustained, is not necessarily fatal for Asean but it will ­weaken the group significantly. Under President ­Suharto, Indonesia took its leadership role in Asean seriously and, while defending its own national interests, was careful to make compromises where necessary to maintain Asean harmony. An example concerned Asean’s policy towards Vietnam’s invasion of Cambodia in December 1978, where it overcame the pull of its traditional friendship with Vietnam in order to accommodate Thailand’s strategic need to force Vietnam out of Cambodia. It is not clear if Indonesia is still willing to adopt such a vital leadership role within Asean.

The split between mainland and maritime Asean

Another challenge is that the countries of mainland Asean are increasingly subject to different influences and interests than mari­time Asean. For the countries situated just south of China and around the Mekong ­Basin, the gravitational pull of China’s economy is becoming ever stronger. These countries are also integrating rapidly outside the ­Asean framework through the Greater ­Mekong Sub-­Region (GMS) integration initiative, which brings China’s two southernmost ­provinces ­tog­ether with Myanmar, Laos, Cambodia, Thailand and Vietnam.

The maritime Asean economies have ­enjoyed deepening economic ties with China, but the country’s impact is much less pervasive and they are not involved in the GMS at all.

As China and the Mekong region become more important engines of growth, this is causing the mainland ­Asean countries to view their regional interests from a different perspective, one much less supportive of Asean solidarity. This came out clearly in the ­Asean Foreign Ministers’ Meeting in Phnom Penh in July 2012 when, for the first time in its 45-year history, Asean’s foreign ministers failed to ­issue a joint communiqué after the host, Cambodia, refused to go along with the draft prepared by other Asean members that contained references which ­China was uncomfortable with.

Thailand, Laos and Cambodia have not shown much support for the Philippines and Vietnam in the latter’s clashes with China over territorial disputes. In areas of econo­mic cooperation, it is also telling how countries such as Thailand are much more excited by the prospects of a high-speed rail link between Kunming in China and Bangkok than in the high-speed link between Bangkok and Kuala Lumpur.

Of course, one should not exaggerate this mainland versus maritime divide as it is not so clear-cut. Vietnam, a Mekong country, is having difficult relations with China, while Myanmar has become more cautious about its ties with China. However, as China’s trade, investment and other linkages with the Mekong countries intensify, it is inevitable that the country’s gravitational pull will become even more compelling, pulling the mainland Asean countries away from their maritime partners in Asean.

China’s much more assertive stance in recent years on a range of issues, including territorial disputes and the role of the US in the region, will only deepen this drift within Asean.

What are the implications?

For any major regional integration effort to work, the larger and more powerful countries within the region must provide leadership and demonstrate commitment, if necessary, by even ­making compromises on their national policy preferences occasionally, as Germany has done in Europe. If the two largest strategic players in Asean — Indonesia and Thailand — are no longer willing to play along, then the prospects look poor for the AEC to take complete shape and provide the full range of benefits it potentially could.

As it stands, this unfortunate scenario is more likely now. While the AEC will make some progress which will boost flows of trade and capital, it is unlikely to progress to a point where such intra-­regional flows are so substantial as to provide the scale economies needed to make Asean as a whole super-­competitive.

Such an outcome has particularly important implications for Malaysia and Singapore, two highly open but mid-sized economies, which have followed a foreign policy of being friendly with both China and the US, while also having extensive security arrangements with the Americans. On the economic front, these countries are well ahead of their ­Asean neighbours and have reached a level of development where further growth does require an ability to scale up over a much larger market than either possesses on its own.

If Asean cannot afford them this opportunity, then Malaysia and Singapore need to fashion new strategies that are independent of the group, perhaps jointly and perhaps involving deeper integration with the developed economies. It is not surprising that both countries are eager fans of the Trans-Pacific Partnership, which will bring them closer to the US, Japan and Australia, while Indonesia and Thailand are not.

Conclusion

This year, the year of the Asean Community, is clearly not going to be the great new beginning for Asean it could have been. The growing ­divides within the grouping clearly do not mark the end of Asean as we know it. But it may well mark the beginning of the end, ­unless Asean countries confront these new diverging forces and refashion their engagement accordingly.

Manu Bhaskaran is a partner and head of ­economic research at Centennial Group Inc, an economics consultancy

This article first appeared in Forum, The Edge Malaysia Weekly, on January 12 - 18, 2015.